New day trader’s expectations and how to manage day trading?

New day trader’s expectations and how he should be managing his day trading?

New day trader’s expectations

If making money while working a completely flexible schedule sounds like the life for you then it is a very good idea to spend some time looking around at the day trading field. With tons of people working for themselves at the hours, they choose to work it can be extremely exciting and rewarding for a lot of people. Learning how day traders actually make their money though can also be very exciting and you are going to have that very opportunity right now.

The best indicator of just how successful a transaction does not always have to be measured in terms of profit though. If you are only looking to make massive amounts of money then you could very well end up being disappointed after your first transaction goes badly. Not all investors are going to find instant success in a bottle with the stock market and day trade is much harder than typical stocks. In order to actually find the results that you want, you need to take some time and carefully review your goals. What do you really intend to pull out of the stock market?

Bad is Good

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Advice for new traders

Advice for new traders and What does it take to be a successful trader?

advice for new traders

I started trading in January 2010 with the attitude as most new traders. I believed I could double my capital in no time and gain the financial independence that I was seeking, after all, it’s straightforward right: purchase low sell high, ‘WRONG’. As I was dreaming about my financial freedom my account was dwindling before I knew it. I was down 25%.

Now looking back on those short months, I asked where I went wrong. Because I’ve studied the market, different strategies, the Greeks, when to entry/exit, trading psychology, the importance of a plan, paid advisory services, and read a lot of horror stories about people blowing out their account.

It’s not how much we know that makes us successful, it’s how we apply the knowledge we have that makes us a successful trader.

So what will it take for me to be successful? Well, when reviewing all my trades, my thought process over the previous few months and identifying crucial mistakes.  My plan to flip this business around was straightforward, however, one of the toughest to follow. For me, it’s simply following my set-up. For whatever reason, I haven’t and I was down 25%. (Not saying it would have been different). Why haven’t I followed my plan the procedures I’ve laid out to give my business the best possibility of success? Well, perhaps it’s an absence of confidence, inexperience, the worry of losing, maybe somewhere deep down inside there’s a fear of being successful (now that’s deep) but who knows.

My advice for new traders

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8 Ways To Get Started Right

Get started right in trading

8 Ways To Get Started Right in trading

1) Write down your ‘Why’

Why are you starting your own business? Why are you trading stocks/shares/Forex/options etc.? Do you want to be your own boss? Or you desire more freedom and time to spend with your families? More money? Whatever your WHY, you will need to know what keeps you going when things are not going well for you.
For myself, my WHY is rather simple. I have been leading an average life, and I am not content with it. It is not to say I do not appreciate my lifestyle currently, but rather, I believe that I can shape my destiny through my own actions, and am willing to work towards it.

2) Write down your Goals

Athletes, successful businessman, doctors, lawyers, and great achievers in all fields use goal setting. Statistics show people who write down their goals are 80% more apt to attain them. Short-term goals are simpler to achieve than long-term goals. The reason is, achieving each goal can help you build up momentum to reach your long-term goal. When you do achieve your short-term goals, don’t forget to reward yourself and celebrate.
I have written down my goals down for all to view and possibly laugh at me – to even think I can achieve what I have set. Nevertheless, I will stick to this goal and work towards it.

3) Expand your Knowledge

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Advice for traders

Top 8 Practical Advice for traders

Advice for traders

I have tried to compile some Advice for Traders. The post is lengthy but is important to communicate the subject in detail with the traders.

BE CONFIDENT IN YOUR TRADING

Taking up a position in a stock when you are less than 100% confident is just a disaster waiting to happen. Being confident doesn’t mean being right. You can’t always be right. However, based on the facts you have available to you regarding the stock and/or company, you can be 100% confident that you have done your homework based on what information you have available to you. Anything less than this will tend to induce uncertainty into your trading. This will often times undermine your confidence and ultimately your ability to stand firm when others are selling.

By the same token, you must also be confident enough to exit a position when you realize you have made a mistake in a trade. No one is suggesting you hold a stock that is in trouble. Rather, you base your trading on facts, not fluctuations in the markets. Once you have made your decision to buy or sell, if you are right, ultimately the markets will come to you with a profit. Others may sell because they see someone next to them sell, but that is not, and never has been, the road to success on Dalal Street. Don’t follow the crowd – follow your brain, follow the facts. Be confident in your trading and thinking and you will generally (if you are smart and use all the facts at hand) come out on top a large percentage of the time.

HAVE A COMPLETE PLAN BEFORE ENTERING ANY TRADE

This is so critical to successful trading, yet so rarely do I see people do it. Before you ever place a trade, you must – absolutely must – have a plan of action for how you are going to handle the trade. What price you are going to pay, what price you are going to sell at, how many shares you will buy, what price you will cut your losses at, etc. This is critical. You must have a strategy to handle not only the upside but also the downside. The good and the bad about the trade. Where will you sell the stock should it move up and what price will you exit the trade should it move south. How long will you hold the stock if it doesn’t move at all? These are all questions that should be asked and answered before you purchase any stock for a trade. This goes hand in hand with being 100% confident. You must have a plan of attack.

Think of each stock you buy like a battle to be fought on the battlefield. You are the 4 star General of the trade. Do you think a General would direct his troops onto the battlefield without a full plan of attack? Without thinking out every possible scenario or what could go right or wrong? This is exactly how you must approach each trade you make.

Just as important: once you develop a plan, adhere to it. If the stock hits your sell price, sell and move on; if the stock hits your stop, get out. Don’t change your strategies because of your emotions – change only because of additional facts which you did not have when you formulated your plan, or if you clearly identify an error. Never change your plan to try to justify your actions or justify the movement of the stock.

Remember the old saying: the market is always right. To be successful, you need to understand the only mistakes that are made in trading are your own. As soon as you identify a mistake, take action to correct it, not justify it. Continue reading “Advice for traders”

Advice for Day trading in India

Few Tips for day trading in India

Before you start day trading in India, Find out is day trading meant for you?

DON’T CHASE STOCKS

Stocks go up because people (usually large numbers of people) are buying the stock. As a trader, this is usually not a good time to also be buying. As such, be very cautious about buying stocks that are rapidly moving away from you. The true money in stocks is made by buying stocks prior to a sudden move, not during a sudden move. The one possible exception to this may be if there is some very positive news that has caught the markets off guard and/or if the news is so outstanding that there is a high probability that the stock may benefit for multiple days. Sudden moves tend to reverse and if you get into the habit of chasing stocks that are moving up, more times than not you’ll end up paying overly high prices and/or getting caught in a downward move shortly thereafter.

Again, generally, people that buy late are buying on pure emotion (greed and fear). Those are the two worst reasons to buy anything – not just stocks. True, you may miss out on the stock, however, in most all cases, it’s better to wait and find another stock, than to pay too much. Patience in the stock market is very important; usually, you’ll do better by avoiding the temptation to “jump” when that impulse is largely a result of a move in the share price alone.

DON’T RUSH INTO ANY TRADE

This is along the lines of the above comment; however, it is worth elaborating on. Often time’s stocks will give you many chances to get into them at current (or sometimes even lower) levels. Generally, there are few cases that require sudden action if you are really careful in how you trade. Sometimes the best trades are ones in which you wait patiently for the stock to come to you. If you feel the need to rush to order a stock, that’s sometimes (not always, but sometimes) a warning sign that you are acting not on a well laid out plan for the trade, but an impulse to “get into a trade” regardless of whether or not the stock is trading at what is really an ideal price.

Keep in mind as well: it’s often not a bad idea to take up positions in a trade little by little. If you plan to own 1000 shares, consider buying 300 shares and then seeing how the stock trades. Often times this will allow you to better judge the market and take advantage of Intraday weakness. If you do happen to miss purchasing the additional shares, there is almost always another trade you can put the cash to work in.

TRYING FOR TOPS AND BOTTOMS

People tend to have a desire to buy at the bottom and sell at the top. Not just near the top, but the “exact” top. It’s simply human nature to want to be the best at something and day trading in India is no different. Most people that take up day trading in India want to be the best they can be. I would much rather give away 10% at the top and 10% at the bottom. You will drive yourself crazy if you punish yourself for not selling at the high or buying at the low, as it’s almost impossible for most people to do on any sort of consistent basis. Far more often than not, you’ll simply end up missing the trade. Even missing a top or bottom by 20% is nothing to worry about. As many a successful trader has said, “You can worry about the tops and bottoms and I’ll worry about the remaining 60%”. In fact, it’s often much safer to wait until a stock clearly signals a move either up or down before taking up your position.

DON’T GET GREEDY

Two of the biggest emotions a trader has to overcome is fear and greed. Many traders fall victim to greed once they see a trade become profitable – simply by not having a firm exit point in mind. It’s generally best to decide on what levels you wish to sell prior to entering into a trade to avoid this. If you feel yourself trying to justify higher levels of the stock and/or ignoring the current profit “as though it were nothing” you probably need to stop and consider not only the value of your profit but the current risk to it by holding longer.

Often times traders who are successful tend to lose respect for the actual value of a dollar. Regardless of how much money you have, you must not lose sight of what each trade produces and the value of the returns in relation to the capital used to produce those gains. An example might be someone with several million dollars. If this person puts $10,000 in a position and saw it produce a gain of $2,000 they might not realize it’s time to take profits. While $2,000 is nothing when compared to several million, a 20% gain should always sound alarm (i.e. Sell) bells in a trader’s head. A common method to help combat this is to look at your trades strictly from a percentage standpoint of view, rather than a dollar standpoint. This allows you to always calculate gains and losses with consideration to the amount of capital at risk for any given trade.

In the movies, “greed is good”, but in day trading in India, it’s generally an emotion that does little more than getting in the way of clear and level headed thinking.

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Who are Stock traders?

Who are Stock Traders and what they do?

 

The most common method of involvement in the stock market, the concept grasped by most people, is a simple stock purchase. Stock traders have been around for hundreds of years, buying and selling stock on the open market. Investors seek a company they like, one which has potential to make a profit and buy a piece of the company known as a share of stock.
Stock traders usually like the tangible aspects of purchasing stock. They feel more emotional involvement with the company and can often form some sort of unspoken bond with the company. They typically follow the stock’s progress each day and feel better when the stock’s price rise and worse when the price drops. Their goal in this process is to buy the stock when it is undervalued and sell it when the price exceeds the commonly perceived value. This is known as a buy-and-hold strategy and has been used for many years to produce profits.
Stock traders have two basic strategies when it comes to making money in the stock market. They are:

  • Buying the stock. A trader will purchase the stock at a low point and sell it at a higher price, thus creating a profit for their account. This is known as buying low and selling high. Someone who does this on a consistent basis will make a lot of money.
  • Shorting the stock. Not all stocks increase in value, so when a stock’s price is going down, a trader can make money by shorting the stock. This means selling stock that you don’t even own to open a trade, then replacing it later with the stock you purchase at a lower price. When you short a stock and the stock loses money, you make a profit.

One of the most common stock patterns is known as “channeling.” It is a simple, potentially profitable pattern that a stock follows between two price points, known as support and resistance levels. When a stock trades in the same repeatable manner, stock traders can buy the low and sell when the price nears its peak. Traders who find stocks that trade in a repeatable pattern have discovered a potential key to the door of profitability. A big selling point for the stock is the permanence of the transaction. An individual who purchases stock in a company owns that stock until they sell it or give it away, or until the company no longer exists. This is unlike an option purchase, which has a limited shelf life.

Some investors have owned the same shares of stock for decades. Stocks also often come with dividends, quarterly or yearly payments made to individuals who have invested in the company. Those who own options do not receive dividends. A student can learn how to be an effective trader by following prescribed guidelines which are designed for safety and enhanced profitability.

A newbie can learn how to be an effective trader by following prescribed guidelines which are designed for safety and enhanced profitability. If you are interested in joining our guidance program. Please shoot us a message. Continue reading “Who are Stock traders?”

stock market basics

stock market basicsIntroducing Stock Market Basics

History

In 1782 in America, world’s first stock market came into existence. Prior to this in huge wall compound fights between four types of animals were arranged. People used to earn money on the strength and weakness of these animals. Financial market adopted the same technique and “Stock Exchange” Was born. Later on, the building was built for the stock exchange. American stock exchange was named “Wall Street” after above-stated wall. Those animals used to for fight were Bulls, Beers, Hogs, And Sheep. Each of them is having following characteristics.

Bulls – Strong and Aggressive
Beers – Weak and Timid
Hogs – Senseless
Sheep – Intelligent and Analytical

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Day Trading vs. Swing Trading

Day Trading vs. Swing Trading

day trading vs. swing trading

If you are unaware about the day and swing trader, then read this post first.

Day Trading vs. Swing trading is a topic on which every trader thinks over it in his trading career. The Trader is in a dilemma, which one should be chosen. Which one is suitable for you?  Let’s first take a look at each style.  The following is based on the assumption that you follow the idiom cut losers and ride winners

Day Trading

Pros:

  • Very little risk due to not holding positions overnight
  • Easy and quick entries and exits
  • No need to worry about long-term general trends

 

Cons:

  • Much smaller profits than swing trading
  • A very accurate system is required
  • Not good for people who have a day job.

 

Pros 1 and 2 are very easy to understand.

For pro 3, I believe we do not need to worry about the long-term trend of a position that you are day trading because we try to capture small moves for a day position.  If a stock is in a long-term uptrend, the probability that it will retrace at a certain point it is over 99%  since all stocks zig and zag. When it shows any signs of aging, you can fade its intra-day. It is the same when a stock is in a downtrend.

Swing  Trading

Pros:

  1. Bigger profits
  2. No need for a very accurate system
  3. Suitable for everyone,  lawyers, doctors, policemen, you, me and your neighbor

Cons:

  1. More risk due to holding positions overnight
  2. A lot of your positions might die since they require much bigger moves

Pro 1 is true since I always believe that your risk and reward is mathematically proportional.  If you take a bigger risk, you MIGHT have a bigger reward.

Pro 2. I explained in this post (Probability and Risk/Reward Ratio) that you will still make money even if the accuracy of your system is below 50%.

What Does it Take to be a Stock Trader?

What needs to be done to be a Stock Trader?

Stock trader
Being a stock trader takes a total mental commitment to the task. It becomes a complete way of life. You cannot be a part timer. You cannot work at a regular job and trade stocks successfully.

When you decide to make your living this way you must be willing to work 365 days a year, 7 days each week, 24 hours every day with no time off. I know.

How do I know? As a blogger for 7 years and a part-time stock trader, I can personally tell you there is no time off. Never. Almost every waking moment is given to thinking about your current positions. Where should I sell? Should I move my stop up a little more? There are 3 more trades I’d like to make, but I need to save some extra cash in case I need it for a margin call. It is hard to pass up a trade that looks as good as XYZ, but I have to maintain my trading discipline. And so much more.

These are just a few of the thoughts that run through your head. You are constantly being torn by the natural enemies of fear and greed, yet you must hold your equilibrium to try to make dispassionate decisions. The first law of trading is to protect your capital so that any single trade will not have you going home broke.

If you are working a regular job or you own a business, you cannot be a stock trader. One or the other or both of these pursuits will suffer. When I owned my advisory company I did not make one single trade for 2 years because I understood the commitment necessary to be a successful trader.
Why am I telling you all this? Because I don’t want you to lose your money in the market as so many people do and I especially don’t want you to think you can be a day trader. You can still make money in the market and beat 90% of the Dalal Street experts.

Here’s how.

First, you must learn that you CAN time the market even though your broker and all those “experts” will tell you that you can’t. There are several good timing advisory services that you may subscribe to or you can develop your own method.

Second, don’t believe all that horse wash about research. That is Dalal Street smoke and mirrors. Don’t try to pick individual stocks. Stick to no-load mutual funds with a discount broker. Buy only the best performing funds during the past 6 and 12 months. When they quit being in the top 1%sell them and find new ones that are going up.

There isn’t enough space here to give you the details. I want you to realize that you can safely make plenty of money in the market without devoting 365/7/24.